Google AppEngine is a platform for hosting scalable web applications and services. It provides automatic scaling of resources and a pay-as-you-go billing model. The main components include a runtime environment for Java and Python, a static file server, and a scalable and flexible datastore. The datastore acts as the central database, storing entities which contain properties mapped to key-value pairs. Entities belong to kinds and each has a unique key. The Python API provides methods like put() and get_or_insert() for creating, retrieving, and deleting entities from the datastore.